Loyalty Wars

The battle to capture and retain customers in a world where price, convenience and even customer service have become commoditized is in full swing. “The risk is you end up in a loyalty war [where] companies begin to use the loyalty scheme or the loyalty component of [the card] as another form of price escalation,” warned Bryon Pearson, president of LoyaltyOne and contributing editor to Colloquy, a magazine that has covered the loyalty marketing industry since 1990. “The intelligence that sits behind these programs is where the real value is,” he said. “The power of the loyalty program is in the customer information and the connectivity that it creates between companies and customers.”

Champions of today’s best-in-class loyalty cards are looking well beyond using discounts to drive shopper behavior. Retailers are turning to more refined tools — big data and predictive analytics — to identify what the customer is going to buy before she even knows she’s going to buy it. Armed with that kind of knowledge, retailers can construct a steady stream of personalized offers for their highest-profit customers walking into their respective stores.

Those insights are being mined for more than just shopper behavior. “The customer information behind the shopping patterns is actually being used to determine things like what products should be listed or delisted,” Pearson said. “They’re using it to [formulate] price and promotion strategies. The other thing you can do is inform real-estate strategy — where should you put a store,” he added, with a tailored approach that matches segmented formats against optimal markets. “It really does offer a transformational component to think about [the retailer’s] whole strategy.”

And in the not-to-distant future, those loyalty cards may be able to inform healthcare initiatives. Tying health and wellness into the loyalty platform helps position retailers as a pretty unique wellness driver for employers and payers. If an employee manages their diabetes better; if a covered associate quits smoking; if a Medicare recipient loses weight — theoretically a loyalty program could reward each of those behaviors across exclusive subsegments of a retailer’s loyalty program pool. It also represents an important opportunity to capture additional prescriptions.

That ability to offer health-related incentives will help elevate how people think about retail loyalty programs. And it will create new opportunities for retailers to expand their programs. In this environment, it’s not just consumer packaged goods companies that will want to invest in these types of programs, but likely health insurers too.

That may be a significant differentiator in the very near future. As many as 18.4 loyalty key tags are hanging on the keychain of the average customer (or uploaded to a smartphone via a KeyRing app), according to the 2011 Colloquy Loyalty Census, which tabulated 2.1 billion loyalty members all told, including 98.1 million in the drug channel. On a regular basis, consumers only use 8.4 of those loyalty programs, and in many cases, this includes the cards of direct competitors.

“Depending upon who is in your marketplace, there’ll be a number of customers who carry a CVS card and a Walgreens card and a Safeway card,” Pearson told DSN. “The way consumers look at loyalty [programs], they see them as real value-added components.” Maintaining relevance in the mind of the consumer is the key to being one of the eight regularly used programs, he said.

But clearly retailers like Walgreens, Rite Aid, Safeway and CVS, which has invested heavily in its ExtraCare program for more than a decade, are looking to make a shorter list with consumers. True differentiation driving relevant shopping experiences will define future loyalty winners.

“Our ability to know that customer and influence that customer and ultimately give them a better experience, a differentiated experience … is just a huge opportunity,” Walgreens chief customer experience officer Graham Atkinson, architect of the company’s new Balance Rewards program, told DSN in a mid-August interview. “How we actually segment our customers into much more meaningful universes and groups so that we can understand what’s really important to them is going to be as much of a game changer as the actual store experience.”

TRENDING STORIES

Pedigree Dentastix introduces treats to fight ‘dog breath’

NASHVILLE, Tenn. – The Pedigree Dentastix line now offers Fresh Treats for Dogs — a new product to combat "dog breath" and assist with overall canine oral care, including tartar control.

Oral care is the No. 1 health issue veterinarians see in dogs; according to The Waltham Centre for Pet Nutrition, bad breath is a sign of potential oral care issues, including gum disease. Four-out-of-five dogs over the age of three years show signs of gum disease, which when left untreated, can advance to the development of other diseases in dogs, including heart and kidney disease as well as some forms of cancer.

"At Pedigree, we take oral care seriously," said Tiffany Bierer, health and nutritional sciences manager for Mars Petcare U.S., the makers of Pedigree Food for Dogs. "That’s why we make it a priority to offer a variety of products for dogs that have oral care benefits. Combined with regular visits to your veterinarian and a consistent oral care routine, these products help combat oral care issues and minimize those bad dog breath moments."

The new Pedigree Dentastix Fresh Treats for Dogs are clinically proven to reduce tartar build-up by up to 89%. The treats also contain a patented active ingredient combination to help freshen dogs’ breath, and the chewy texture of Dentastix helps clean down to the gum line.

TRENDING STORIES

Natural pet products category shows steady growth

ROCKVILLE, Md. – Big changes are underway in the market for pet goods, according to "Natural, Organic and Eco-Friendly Pet Products in the U.S.," a recently released study from market research firm Packaged Facts.

Hill’s is reformulating Science Diet as a natural product line, and Nestlé Purina is coming on strong with Purina One Beyond. In addition, Walmart has launched Pure Balance as it first natural store brand.

In natural pet food aisles, the hottest product trends include grain-free and human grade, taking superpremium natural pet food to new levels — and price points. In the pet care aisle, eco-friendly products with sustainable packaging and production processes abound. U.S. retail sales of natural pet products totaled $4.1 billion in 2012, according to a Packaged Facts estimate, reflecting a compound annual growth rate of 17% over the 2008-2012 period. Annual sales growth has consistently been in the double digits for the category.

Helping underpin this steady increase in sales is consumer demand for products perceived to be safer — a pet owner priority spurred by the spring 2007 pet food recalls. According to Packaged Facts’ August 2012 Pet Owner Survey, 38% of pet owners believe that natural/organic brand pet products are often better than standard national brand products, and 63% are very concerned about the safety of the pet products they buy.

Pulitzer Prize-winner Peggy Noonan, former Florida Gov. Jeb Bush and singer Diana Ross now feature on the schedule for the National Association of Chain Drug Stores Annual Meeting, slated for April 21-24 in Palm Beach, Fla.

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